Debt Rattle November 10 2016
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Byron In Chinatown, Pell Street, New York 1900 • To Make America Great Again, Write Off The Private Debt (Steve Keen) • Asian Markets Soar, Nikkei Roc
[See the full post at: Debt Rattle November 10 2016]Keen is a good diagnostician but Automatic Earth knows he is not a good predictor. There is no way to fix or repair the debt overhang. It will have to be written off or somehow inflated away. How that would bedone I have no clue but it would still leave the economy with no growth or a growth only after a shrinkage of gigantic proportion. This after all is the foundational AE position. Correct me if I am wrong.
At any rate Trump is not going to kill the financial asset inflation dream world of The Street since it’s the only dream he knows, like most Americans. The American dream is to own assets whose prices rise.. Absent that dream America lies prostrate, see the Great Depression.
Trump is different than most all businessman billionaires in that he did not get that money from asset inflation but rather by stripping cash from real estate partnerships or other business ventures. As a national model of wealth creation this is a non starter of course. No, he will be all in on credit expansion and low rates even as those things leave the scene.
In more general terms imagining Trump doing anything positive except maybe some reproachmont with Russia and scaling back the War on Terror is a pipe dream. To the extent he scales back our international military interventionist foreign policy will be part of the extent to which he attacks by laws and police power his domestic opposition. Hillary first perhaps.. Never mind the W Bush White House kept a private mail server for 6 years and ‘lost’ 23 million emails.
None of this is to defend Clintonism or any part the now dead establishment ways but it has pained me greatly to see Trump as some sort of victory. The choice was the devil or the deep blue sea. The deep blue sea has been chosen. Now we try to stay afloat as history wiil finally visit the homes of America.
Yup. W hat Rapier said.
And so much for the repudiation of the Wall St/DC axis. Wall St will love Trump because he will put big business ahead of the little guy every time as his kids get cushy numbers with the MI Complex.
So, Keen says: “What they ignore is that banks create money and demand when they lend, and both money and demand fall when debt is repaid.” I’ve otherwise heard it expressed that “debt repayment destroys money”. Is not debt repayment a renewal of credit? I get a loan based on my ability to repay. I repay and live to borrow again. My repayment record and income come to demonstrate I am responsible and am provided more credit/debt which I will repay, the loan still hedged by the lender.
Demand for some products will fall when that need is met, but the individual/household/company will have other needs as a consequence of new products or entering a new phase of life. If there are not the savings to buy with cash, then credit is used. With aging, some needs decline or disappear.
Having used credit to bring consumption forward from the future without and ability to repay the debt, interest and admin fees – well unless it is due to unforeseen events that cut one’s income – individual/household/company – is living beyond one’s means and the vendor/lender should not have extended credit.
Although Steve Keen is working to improve economic modelling, this comment makes we wonder about even the better economists.
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